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Informist, Tuesday, Jan. 6, 2026

By Cassandra Carvalho

MUMBAI – The one-day interbank call money rate ended below the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Tuesday as surplus liquidity in the banking system increased, dealers said. Settlement of the RBI's INR-500-billion open market operation auction conducted Monday brought inflows into the banking system Tuesday. 

The one-day call rate ended at 4.80% against 5.40% Monday's close for one-day loans. The weighted average call rate was 5.31% Tuesday, down from 5.40% the previous session. The weighted average rate in the broader tri-party repo market was 5.07%, down from 5.15% in the previous session. The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 648.12 billion Monday, higher than INR 497.02 billion Sunday.

Liquidity surplus likely increased during the day due to the inflows from the OMO settlement and subsequently rates in the overnight borrowing markets eased, dealers said. However, due to payments of INR 400 billion to INR 500 billion for excise duty due Wednesday, there was an upward pressure on rates, dealers said.

Excluding the routine tax payments, the outlook on systemic liquidity is positive up till next week, due to several inflows into the banking system, dealers said. Along with the OMO settlement Tuesday, redemption of a gilt by the end of this week will aid the liquidity surplus, dealers said. The 7.59%, 2026 bond will mature on Sunday, and dealers said that its redemption of INR 907.86 billion may be paid out on Friday itself. Next week, another INR-500-billion OMO auction and a three-year $10 billion dollar-rupee buy-sell swap auction will add to durable liquidity.

"Around 90,000-95,000 crore (INR 900 billion to INR 950 billion) of G-sec redemption is there. Nearly one lakh crore (INR 1.00 trillion) of SDL (state bond) redemptions is there this quarter (Jan-Mar), so two lakhs (INR 2.00 trillion) is coming from there itself," a trader at a primary dealership said. "And the G-sec redemption will be end of this week only, on 9th (Friday) only." 

Due to these expected inflows, traders were not expecting the RBI to conduct any variable rate repo auctions this week. However, post market hours, the RBI said it will conduct a two-day VRR auction for INR 1.00 trillion Wednesday, likely due to outflows for excise duty, dealers said.

Due to the sharp difference in rates in the triparty repo market and the call money market, traders took advantage of the arbitrage between the two markets, to borrow at cheaper rates and lend at higher rates, they said. 

OUTLOOK

On Wednesday, the one-day call money rate may open near the RBI's repo rate of 5.25% due to outflows of INR 400 billion to INR 500 billion for excise duty payments, dealers said. However, rates may ease due to the RBI's VRR auction. The central bank will conduct a two-day VRR auction for INR 1.00 trillion 0930-1000 IST Wednesday.

Systemic liquidity is seen returning to a comfortable surplus by next week, after one gilt redemption, and two tranches of open market operation auctions add nearly INR 2 trillion of liquidity by Jan. 12 and a three-year $10 billion dollar-rupee buy-sell swap auction on Jan. 13 that will add to durable liquidity. That may cause the central bank to begin conducting variable rate reverse repo auctions soon, dealers said. During the day, the one-day call money rate is expected to move in a range of 4.70-5.50%, dealers said. 

CALL RATE

4.80%--Tuesday's close for one-day loans

5.40%--Tuesday's open for one-day loans

5.40%--Monday's close for one-day loans

BENCHMARK MIBOR (in %)  

Mumbai Interbank Outright Rates compiled by Financial Benchmarks India:

India Call: Above RBI's repo rate on early demand for funds

MUMBAI – The interbank call money rate was above the Reserve Bank of India's repo rate of 5.25% due to early demand for funds from primary dealerships Tuesday, dealers said. However, rates in the tri-party repo market were at 5.10%, below the RBI's repo rate, which shows lower demand for funds amid surplus liquidity, they said.

At 1001 IST, the one-day call rate was 5.40%, steady from Monday's close. The weighted average call rate was also steady from the previous day at 5.40%. The weighted average rate in the wider tri-party repo market, which includes mutual funds, was largely steady from the previous day at 5.14%.  

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 648.12 billion Monday, higher than INR 497.02 billion Sunday. However, the cash balances with the RBI fell to INR 7.46 trillion Monday from INR 7.92 trillion Sunday, against the requirement of INR 7.48 trillion.

Including net cash balances against the reporting needs, the total liquidity in the banking system fell to INR 668.12 billion Monday from INR 937.02 billion Sunday. This was due to outflows of INR 320 billion for gilt auction payments.    

However, dealers see rates cooling during the day due to a higher liquidity surplus and no major scheduled outflows, they said. "Banks are putting in orders at 5.35% in call and only PDs were there at 5.40% on borrowing side," a dealer at a state-owned bank said. "Banks have enough liquidity with them as it is also not month-crossing or quarter-crossing, rates will go on lower side eventually," the dealer said.

Dealers expect the central bank to conduct an overnight or two-day variable rate repo auction for INR 500 billion Wednesday or later this week due to scheduled outflows for excise duty payments. The market expects INR 250 billion to INR 300 billion outflows for excise duty. "It is unlikely that RBI will have VRR today (Tuesday), we can expect one tomorrow (Wednesday) or Thursday for 50,000 crores (INR 500 billion)," the dealer added. 

Since Dec. 15, the central bank has conducted 16 VRR auctions almost every day. The total temporary liquidity infused was INR 9.51 trillion through these VRR auctions. Currently, only the five-day VRR auction, which infused INR 257.95 billion on Friday, is due for reversal, while the other 15 have already matured. The reversal of transient liquidity infused through Friday's five-day VRR is due Wednesday. (J. Navya Sruthi)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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